Since the flash-crash (24th of July down to $1,071) the technical picture
for Gold has been improving step by step. First a $100-short-squeeze pushed
Gold towards $1,170 in mid of august. Gold only briefly touched this level
and corrected all the way down to $1,098. But during the last two weeks Gold
managed to start a rally from these levels. Therefore we have a "$27 higher
low" on the chart. That is positive. It has been quite a while since we got
such a higher low in the gold market. The miners and silver still remain kinda
shaky but one could argue for bottom building patterns as well...
As you know I have been quite bearish the last 1-2 years but I feel like its
getting time to join the bulls now. Its still way too early to call the definite
end of this devastating four year bear market in precious metals but while
listening to the gold-market the picture clearly is improving. I also like
the fact that basically nobody is talking about a new gold bull. People gave
up on precious metals or lost their last shirt catching a falling knife. As
well I like the type of price action in the last two weeks... Looks like a "strong
wall of worry" on which Gold is climbing higher. On top my model is in super
bull mode!
Therefore I am now officially changing my mantra to "buy the dips as long
as Gold stays above $1,120".
The fact that Gold is outperforming silver and the miners (GDX & GDXJ)
is not supporting the idea of a new bull in Gold. You'd expect the miners to
lead the sector higher. Especially with these low oil prices but so far the
performance is pretty muted.
For all my german readers, here is my latest article in the "Smart Investor": Florian
Grummes - Trendwende vollzogen?
Midas Touch Gold Model Summary
My Gold Model finally and for the first time ever is in super strong bull
mode!!!
Since it's development it has been bearish most of the time but now the vast
majority of its signals are all flashing a strong buy.
Last Thursday the Gold USD-Weekly Chart flipped to bullish. The Gold
USD-Daily Chart is already on a buy signal since 10 days. The Gold
Cot-Report, Gold Sentiment and Gold Seasonality are already on
a buy signal since many many weeks. The SPDR Gold Holdings has seen
some inflows and Gold in $, €, £, ¥ turned bullish
on Friday. Now that the FED has officially announced negative US Real
Interest Rates. we should not be surprised if this is going to be the
main fundamental driver for a new Gold bull.
Overall the model is in Buy/Bull mode.
Gold Daily Chart
As I have already laid out Gold is bullish - at least short-term The only
concern is the overbought stochastic indicator. This indicator needs to embed
if Gold wants to push towards $1,060 and later towards the 200MA ($1,179).
If it doesn't we will get another setback which has to hold above $1,120 to
keep the bullish picture alive.
Overall a test of the former support and now strong resistance zone $1,170-$1,180
is very likely until mid of October.
Recommendations:
Swing-traders (if not already long) should search for an entry below
$1,140 with a tight stopp at $1,120 and a profit target at $1,180. The risk
reward ratio is not optimal but worth a try. If you don't find an entry within
the next couple of days you need to stay patient. The resistance around $1,180
is a clear sell on the first attempt and should throw Gold back to at least
$1,140 again later in October or November. Then you will get another (and better)
chance to buy the dip/weakness.
I also do recommend buying/adding shares of the GDX and GDXJ at current prices.
Keep the position sizing small and use a 25% trailing stopp. Your initial position
should already be profitable. Once the turnaround is getting more clear I will
start publishing interesting stocks that have great fundamentals, an outstanding
management and a very good technical setup.
Investors should now wait until the Goldmarkt presets another opportunity
to pick up the physical metal below $1,100. If it doesn't get that cheap anymore
I hope you acted on my numerous recommendations in the last couple of months.
Long-term personal beliefs
The return of the precious metals secular bull market is moving step by step
closer and should lead to the final parabolic phase. A new bull market will
probably begin in autumn 2015 and could last for 3-8 years or even longer.
Before this can start Gold will need a final selloff down to $1,050-$980. (Note:
I am starting to question this believe)
Long-term price target DowJones/Gold-Ratio remains around 1:1.
Long-term price target Gold/Silver-Ratio remains around 10:1 (for every ounce
of gold there are 9 ounces of silver mined, historically the ratio was at 15:1
during the roman empire).
Long-term price target for Gold remains at US$5,000 to US$8,900 per ounce
within the next 5-10 years.
Fundamentally, as soon as the current bear market is over Gold should start
the final 3rd phase of this long-term secular bull market. 1st stage saw the
miners closing their hedge books, the 2nd stage continuously presented us news
about institutions and central banks buying or repatriating gold. The coming
3rd and finally parabolic stage will end in the distribution to small inexperienced
new traders & investors who will be subject to blind greed and frenzied
panic.
